UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14C
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934
December 9, 2002
Check the appropriate box:
Preliminary Information Statement
__ Confidential, for Use of the Commission Only (as permitted by
Rule 14c-5(d)(2))
XX Definitive Information Statement
Apta Holdings, Inc.
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee:
X No fee required
__ Fee computed on table below per Exchange Act Rules 14c-5(g)
and 0-11
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction
applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth
the amount on which the filing fee is calculated and
state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
__ Fee paid previously with preliminary materials.
__ Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Apta Holdings, Inc.
215 West Main
Street
Maple Shade, NJ
08052
(856) 667-0600
Fax (856) 727-0218
OTCBB: APTA
INFORMATION STATEMENT
December 9, 2002
To the Holders of Apta Holdings, Inc. Common Stock:
This Information Statement is being mailed to the shareholders of
record of Apta Holdings, Inc. ("Apta") on November 29, 2002, in
order to provide information with respect to certain transactions
to be taken by the written consent of the holders(s) of a
majority of the outstanding shares of our common stock that are
entitled to vote on such actions.
All of the corporate actions necessary to approve the proposed
transactions have been approved by the Board of Directors of the
Company as well by stockholders holding a majority of the issued
and outstanding shares of the Company. No further approval is
necessary by the stockholders of the Company, but non-consenting
stockholders are entitled to be informed of such corporate
actions in advance of the date such actions will be effective,
and under common law, to certain dissenters' rights as more fully
described below.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO
SEND US A PROXY.
This Information Statement is furnished solely for the purpose of
informing our stockholders of the proposed corporate actions
pursuant to the Securities and Exchange Act of 1934, as amended
and the Delaware General Corporate Law.
Voting Securities and Principal Holders Thereof
The board of directors of the Company has fixed November 29, 2002
as the record date for the determination of the stockholders
entitled to receive this Information Statement. This Information
Statement is being sent on December 9, 2002 to such holders of
record.
As of November 29, 2002 there were 2,315,000 common shares in the
capital stock of the Company issued and outstanding and held of
record by approximately 625 stockholders. Pursuant to the
Company's certificate of incorporation, each share of common
stock is entitled to one vote on all matters submitted to a vote
of the stockholders.
The following table sets forth the beneficial ownership of the
Common Stock of the Company as of November 29, 2002, by each
person who was known by the Company to beneficially own more than
5% of the common stock, by each director and executive officer
who owns shares of common stock and by all directors and
executive officers as a group:
Shares of Percentage of
Common Stock Outstanding
Name and Address Beneficially Common Stock
of Position Owned Beneficially
Beneficial Owner Owned(1)
Stephen M. Officer,
Robinson(2) Director
172 Tuckerton 485,893 21.0%
Road
Medford, NJ
08055
Harry J. Officer,
Santoro(3) Director
215 West Main 466,164 20.1%
Street
Maple Shade, NJ
08052
James Wherty Investor
3 Wakefield Drive
Medford, NJ 160,500 6.9%
08055
James Dettrey Investor
41 Pulham Drive
Southampton, NJ 191,000 8.3%
08088
All Directors and
Officers as a
group 952,057 41.1%
(2 persons)
(1) Based upon 2,315,000 shares outstanding as of November 29,
2002
(2) Includes 191,500 shares held by Theodora T. Robinson,
spouse of Stephen M. Robinson.
(3) Includes 75,000 shares held by Donna M. Santoro, wife of
Harry J. Santoro, and 37,500 shares held by H. James Santoro,
Inc., a company controlled by Harry J. Santoro.
Rights of Dissenters
Shareholders are entitled to assert dissenter's rights under
Delaware Corporations Code Section 262, a copy of which is
enclosed as Exhibit A.
The Acquisition of Convergix Inc.
The Share Exchange
Convergix is a Canadian corporation which provides a
comprehensive software solution called Amelia, custom
programming, and hosting services to mid-sized airlines and
aircraft fleet operators.
Apta will acquire Convergix by issuing 25,000,000 shares of its
common stock to the shareholders of Convergix in exchange for
their Convergix shares.
The Share Exchange is scheduled to close on December 31, 2002.
After closing, Apta will own 100% of the voting Common Stock of
Convergix. Convergix also has outstanding 117.7 Series I
Preference Shares. Apta is not acquiring the Series I Preference
Shares. The Series One Preference Shares are convertible into
common stock of Convergix; if converted, the holders of the
Series I Preference Shares will own 10% of the Common Stock of
Convergix, and Apta will own 90% of Convergix.
The acquisition will be accomplished pursuant to a share exchange
agreement dated November 20, 2002 (the "Agreement") between the
Company; its wholly owned subsidiaries, Intelisys Acquisition
Inc. ("AcquisitionCo") and Intelisys (Nova Scotia) Company ("Nova
Scotia Co."); and Convergix Inc. ("Convergix"). For details of
the transaction, shareholders should read the Share Exchange
Agreement filed with the SEC as an exhibit to this Information
Statement. The Agreement provides that Apta will issue 3,295,000
shares of Apta common stock plus 21,705,000 "exchangeable shares"
in Intelisys Acquisition Inc. , a subsidiary of Apta. The
exchangeable shares have equal voting rights and equal economic
value as common shares of Apta. These shares may be exchanged by
the holder any time on a 1 for 1 basis for Apta common shares and
if not exchanged prior to December 31, 2012, will be exchanged
for Apta common shares on that date. Throughout this document,
the exchangeable shares are treated as common stock equivalents
and the purchase price of Convergix shall be deemed to be
25,000,000 shares of Apta common stock. All references to Apta
common stock include the exchangeable shares unless otherwise
noted.
Related Transactions
Prior to the execution of the Agreement, a foreign investor
subscribed for 2,666,667 common shares of Convergix at CAD$0.30
(approximately $.20 US) per share for a total investment of
CAD$800,000 (approximately $512,000 US). To date Convergix has
received CAD$700,000 (approximately $448,000 US). The balance of
the investment is expected to close before the closing of the
Transaction. Simultaneously with the closing of the Transaction,
the Company will assume all of the rights and obligations of
Convergix under that subscription agreement, and will issue
common shares of the Company at CAD$0.30 (approximately $.20 US)
per share upon receipt of the balance of the funds to be invested
by the foreign investor. The subscription agreement requires
Convergix (and therefore, after the assignment, the Company) to
repurchase the shares held by the foreign investor no later than
March 31, 2003, at a price equal to the greater of (I) the last
closing price of the shares on the Over-the-Counter Bulletin
Board and (ii) CAD$0.34 (approximately $.22 US) per share.
Change of Management
Simultaneously with the closing of the Transaction, all of the
directors and officers of the Company shall resign and the
shareholders of Convergix shall designate the new board of
directors and the officers of the Company. It is anticipated
that the new Board of Directors of the Company will consist of
Ralph Eisenshmid, Jock English and Malcolm Little. The new
officers of the Company shall be: Ralph Eisenschmid, President
and CEO; Jock English, V.P. Sales and Marketing; and Malcolm
Little, Chief Technology Officer.
Name Change
After closing the Transaction, the Company will change its name
to "Intelisys Aviation Systems U.S.A. Inc." or another suitable
name, to better reflect our new business.
Apta's Current Business
The Company, through its 80% owned subsidiary Beran Corp.,
originates, sells and services loans to businesses secured by
real estate and other business assets ("Business Purpose Loans"),
and consumer loans typically to credit impaired borrowers,
including automobile loans secured by the title to the automobile
and the unconditional guarantee of participating dealers or
individual guarantors pre-approved by Beran.
After closing the Transaction, the Company will sell all of the
assets that it owned prior to the Transaction. The Company will
retain its current principals, Harry J. Santoro and Stephen M.
Robinson, as consultants responsible for disposing of these
assets. The proceeds of the sale will be applied to the
repayment of the debts incurred by the Company prior to the
closing of the Transaction. As compensation for their services,
the consultants will be entitled to keep any proceeds that exceed
the amount required to repay the Company's debts, but if the
proceeds are less than the Company's debts the consultants will
pay the remaining amount of the debts.
Amendments to Charter
Pursuant to the terms of the Agreement, the Company will amend
its certificate of incorporation so as to:
1. increase its authorized share capital to 50,000,000
common shares, $0.001 par value per share;
2. create a new class of preference shares, $0.001 par
value per share; and
3. change the name of the Company to "Intelisys Aviation
Systems U.S.A. Inc." or such other suitable name as the
relevant regulators may allow
Change of Jurisdiction to Florida
After closing the Transaction, the Company will reincorporate in
the state of Florida, or such other state as the Board of
Directors shall determine, with the following authorized capital:
50,000,000 common shares, $.001 par value
30,000,000 blank check preferred shares, issuable in
series
Effect of the Transaction
As a result of the Transaction, Convergix will become the
operating subsidiary of the Company (indirectly, held through
AcquisitionCo and Intelisys (Nova Scotia) Company). The Company
will have no assets other than the shares of its direct and
indirect subsidiaries. After the completion of the Transaction,
the issued and outstanding share capital of the Corporation will
be as follows:
Number of Common Percentage of Voting
Shares or Other Rights
Shares Bearing
Voting Rights
Current Shareholders 3,000,000 10.7%
of the Company
Shareholders of 25,000,000 (1) 89.3%
Convergix
Total 28,000,000 100%
(1) Voting rights held under the terms of the Exchangeable
Shares and the Voting and Exchange Agency Agreement.
Except for reporting requirements under the Securities Act of
1934, no federal or state regulatory requirements must be
complied with or approval obtained in connection with the
Transaction.
US Dollars
All dollar amounts reported herein are in United States dollars
unless otherwise noted. The approximate conversion rate as of
November 8, 2002 is CAD $1.00 for $.64 US.
Forward Looking Statements
The Company is making this statement in order to satisfy the
"safe harbor" provisions contained in the Private Securities
Litigation Reform Act of 1995. The foregoing discussion includes
forward-looking statements relating to the business of the
Company. Such forward-looking statements may be identified by
the use of terminology such as "plan", "may", "will", "expects",
"intends", "anticipates", "estimate", "should", or "continue", or
the negative thereof or other variations thereon or comparable
terminology. Forward-looking statements contained herein or in
other statements made by the Company are made based on
management's expectations and beliefs concerning future events
impacting the Company and are subject to uncertainties and
factors relating to the Company's operations and business
environment, all of which are difficult to predict and many of
which are beyond the control of the Company, that could cause
actual results of the Company to differ materially from those
matters expressed in or implied by forward-looking statements.
The Company believes that the following factors, including but
not limited to the risk factors contained herein, could affect
its future performance and cause actual results of the Company
to differ materially from those expressed in or implied by
forward-looking statements made by or on behalf of the Company:
(a) general economic conditions; (b) regulatory changes or
interpretations of such regulations; (c) uninsurable risks,
including acts of terrorism; (d) unexpected losses, (e) risks
related to competition from established and emerging competitors;
(f) risks that our revenues are highly dependent on the travel
industry which is experiencing a prolonged decrease in business;
(g) risks related to our financial leverage; (i) risks that rapid
technological changes may render our technology obsolete; (j)
risks to our customers; (k) disruptions in capital markets; and
(l) risks related to the fact that we are not yet profitable and
need additional capital to fund our operations.
Risk Factors
The shares of Apta are speculative and involve a high degree
of risk. Apta's only business will be that of Convergix. The
purchase of Shares is suitable only for persons who can afford
the risk of the loss of their entire investment. Prospective
investors should carefully consider, among other things, the
following risk factors before making an investment decision:
Limited Operating History; History of Operating Losses:
Convergix has only recently emerged from its development stage.
As of September 30, 2002, Convergix had entered into a limited
number of contracts for the provision of its software products,
and only commenced commercial shipment of product in 2001.
Accordingly, Convergix has only a limited history upon which an
evaluation of its prospects and future performance can be made.
Such prospects must be considered in the light of risks and
difficulties frequently encountered by new businesses facing
intense competition in an evolving industry, where products have
yet to obtain widespread commercial acceptance and are
characterized by rapid technological obsolescence.
From inception through September 30, 2002, Convergix has incurred
cumulative losses of $4,229,774, and anticipates that losses will
continued for the foreseeable future. Convergix expects to incur
significant expenditures in connection with the development and
marketing of enhanced and new applications which will likely
result in losses until such time, if ever, as Convergix is able
to secure sufficient contracts for its range of products which
would generate adequate revenue to support its operations.
Future operating results will depend on many factors, including
the growth of Convergix' targeted market, demand for Convergix'
products, the level of product and price competition, Convergix'
success in expanding its direct sales force and distribution
channels, and the ability of Convergix to develop and market new
products and control costs, together with general economic
conditions and other factors.
Significant Capital Requirements and a Need for Additional
Financing:
Convergix has an immediate need for cash in order to pay
obligations currently due and to finance its business operations.
Although Convergix believes that it has sufficient resources to
conduct its operations for several months, its continued
operations thereafter will depend upon the availability of cash
flow, if any, from its operations, or its ability to raise
additional funds through equity or debt financing. There is no
assurance that Convergix will be able to obtain additional
funding when it is needed, or that such funding, if available,
will be obtainable on terms acceptable to Convergix. If
Convergix' operations do not produce the necessary cash flow, or
if Convergix cannot obtain needed funds, it may be forced to
reduce or cease its activities with consequent loss to investors.
In addition, should Convergix incur significant presently
unforeseen expenses or delays, Convergix may not be able to
accomplish its goals. Convergix has no current arrangements with
respect to, or sources of, additional financing and there can be
no assurance that additional financing will be available to
Convergix on commercially reasonable terms, if at all. Any
inability to obtain additional financing could have a material
adverse effect on Convergix, including possibly requiring
Convergix to significantly curtail or cease its operations.
Development of Markets Required for Successful Performance by
Convergix:
Convergix has only recently commenced significant marketing
activities, and there can be no assurance that Convergix'
marketing program will be successful. The financial performance
of Convergix will depend, in part, on market acceptance of Amelia
and Convergix' hosting services, and on whether Convergix can
meet and adapt to the requirements of its customers, both in
terms of performance and price. Achieving market acceptance for
Convergix' products will require substantial marketing efforts
and the expenditure of significant funds.
Intense Competition:
New trends and development of new technologies could have an
adverse effect on Convergix' current technology. The market is
subject to rapid change. Competitors vary in size and in the
range of products and services they offer. Convergix expects to
experience additional intense competition from other established
and emerging companies. Similar software is available in all of
Convergix' markets. Increased competition could result in price
reductions, reduced transaction size, fewer customer orders,
reduced gross margins and loss of market share, any of which
could have a material adverse effect on Convergix' business,
operating results and financial condition.
Rapid Technological Change and Dependence on New Products:
The market for Convergix' software is characterized by rapid
technological change, frequent new product introductions and
evolving industry standards. The introduction of products
incorporating new technologies and the emergence of new industry
standards could render existing products obsolete and
unmarketable. The life cycles of Convergix' products are
difficult to estimate. Convergix' future success will depend
largely upon its ability to enhance its current products and to
develop and introduce, on a timely basis, new products that keep
pace with technological developments and emerging industry
standards, and address the increasingly sophisticated needs of
its customers. There can be no assurance that Convergix will be
successful in developing and marketing product enhancements or
new products that respond to technological change or evolving
industry standards, that Convergix will not experience
difficulties that could delay or prevent the successful
development, introduction and marketing of these products, or
that Convergix' new products and product enhancements will
adequately meet the requirements of the marketplace and achieve
market acceptance. Convergix has previously experienced delays
in the development and introduction of new products and product
enhancements. The length of these delays has varied depending
upon the size and scope of the project and the nature of the
problems encountered. If Convergix is unable to develop and
introduce new products or enhancements of existing products in a
timely manner or if Convergix experiences delays in the
commencement of commercial shipments of new products and
enhancements, Convergix' business, operating results and
financial condition would be materially adversely affected.
Risks Associated with International Operations:
Convergix plans to expand its operation into Europe, the Middle
East and Asia which will require significant management attention
and financial resources. Convergix has committed and continues
to commit significant resources to developing international sales
and support channels. There can be no assurance that Convergix'
efforts to develop international sales and support channels will
be successful, and the failure of such efforts could have a
material adverse effect on Convergix' business, operating results
and financial condition.
Management of Growth and Dependence on Key Personnel:
The success of Convergix will be largely dependent on the efforts
of its management. Convergix has no employment agreements with
individuals in various managerial positions, and there can be no
assurance that such persons will continue their employment with
Convergix. The loss of the services of one or more of such key
personnel could have a material adverse effect on Convergix'
ability to maximize its use of its products and technologies or
to develop related products and technologies. Convergix' future
success will depend largely upon its ability to attract, retain
and motivate highly skilled employees. Qualified employees are
in great demand and are likely to remain a limited resource for
the foreseeable future. There can be no assurance that Convergix
will be able to continue to attract and retain sufficient numbers
of highly skilled employees. If Convergix is unable to hire,
train and retain qualified engineers and Convergix' s management
is unable to manage growth effectively, Convergix' business,
operating results and financial condition could be adversely
affected.
Risk of Software Defects:
Software products are complex and may contain errors or defects,
especially when first introduced or when new versions or
enhancements are released. Despite product testing by Convergix
and its potential customers, there can be no assurance that
defects and errors will not be found in new products or in new
versions or enhancements of existing products after commencement
of commercial shipment. Such discovery could result in failure
to achieve market acceptance, which could have a material adverse
effect upon Convergix' business, operating results and financial
condition.
Product Liability:
Convergix' license agreements with its customers typically
contain provisions designed to limit Convergix' exposure to
potential product liability claims. It is possible, however,
that the limitation of liability provisions contained in
Convergix' license agreements may not be effective as a result of
federal, state or local laws or ordinances or unfavorable
judicial decisions. Although Convergix has not experienced any
product liability claims to date, the license and support of
Convergix' software by Convergix may entail the risk of such
claims. A successful product liability claim brought against
Convergix would have a material adverse effect upon Convergix'
business, operating results and financial condition.
Business Interruptions:
Convergix' operations are vulnerable to interruption by fire,
power loss, telecommunications failures, terrorist attacks and
other events beyond its control. Convergix does not have
adequate insurance against business interruptions. If a business
interruption occurs, it could seriously harm Convergix or its
customers.
Patent Infringement:
It could be alleged that Convergix has infringed on certain
patents or other intellectual property rights of others.
Responding to such claims, regardless of their merit, can be time
consuming, costly and a diversion of management's attention and
resources, and could cause Convergix to incur significant
expenses.
Control by Current Shareholders:
The officers of the Company own approximately 53% of the shares
outstanding. Accordingly, such persons will be able to control
the Company, elect all of the Company's directors, increase the
authorized capital, dissolve, merge, sell the assets of the
Company and generally direct the affairs of the Company. See
"Management," "Principal Shareholders" and "Certain
Transactions."
No Assurance of Public Market:
As of the date of this Information Statement, there has been
minimal trading of Apta's common stock. There has been no public
trading market for Convergix' securities. There can be no
assurance that a regular trading market for the Company's
securities will develop or that, if developed, it will be
sustained. The trading price of the securities could be subject
to wide fluctuations, in response to quarterly variations in the
Company's operating results, announcements by the Company or
others, developments affecting the Company, and other events or
factors. In addition, the stock market has experienced extreme
price and volume fluctuations in recent years. These
fluctuations have had a substantial effect on the market prices
for many companies, often unrelated to the operating performance
of such companies, and may adversely affect the market prices of
the securities.
No Dividends:
Neither Convergix nor Apta has paid any cash or other dividends
on its Common Stock and neither expects to declare or pay any
cash dividends in the foreseeable future.
Penny Stock Regulation:
The regulations of the Securities and Exchange Commission
promulgated under the Securities Exchange Act of 1934 (the
"Exchange Act") require additional disclosure relating to the
market for penny stocks in connection with trades in any stock
defined as a penny stock. Commission regulations define a penny
stocks to be an equity security that has a market price of less
than $5.00 per share, subject to certain exceptions. Unless an
exception is available, those regulations require the delivery,
prior to any transaction involving a penny stock, of a disclosure
schedule explaining the penny stock market and the risks
associated therewith, and impose various sales practice
requirements on broker-dealers who sell penny stocks to persons
other than established customers and accredited investors
(generally institutions). In addition, the broker-dealer must
provide the customer with current bid and offer quotations for
the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction, and monthly account statements
showing the market value of each penny stock held in the
customer's account. Moreover, broker-dealers who recommend such
securities to persons other than established customers and
accredited investors must make a special written suitability
determination for the purchaser and receive the purchaser's
written agreement to a transaction prior to a sale. If
Convergix' securities become subject to the regulations
applicable to penny stocks, the market liquidity for Convergix'
securities could be severely affected. In such an event, the
regulations on penny stocks could limit the ability of
broker-dealers to sell Convergix' securities and thus the ability
of purchasers of Convergix' securities to sell their securities
in the secondary market.
CONVERGIX INC.
General
Convergix Inc. ("Convergix") is a provider of integrated software
solutions for regional, mid-sized airlines and fleet operators.
Convergix is a corporation incorporated under the laws of the
Province of New Brunswick, Canada. The address and telephone
number of its main office is:
815 Bombardier Street
Shediac, New Brunswick
Canada, E4P 1H9
(506) 532-8515 or 1-877-532-8515
Cynaptec Information Systems Inc. ("Cynaptec"), also a New
Brunswick corporation, is a wholly-owned subsidiary of Convergix.
Convergix also owns 53.1% of the issued and outstanding shares of
Intelisys Aviation Systems Inc. ("Intelisys"), a Canadian
corporation, with the remaining 46.9% being owned by Cynaptec.
Convergix, Cynaptec and Intelisys are each private companies.
None of them are reporting issuers and none have shares listed or
quoted for trading on any stock exchange, securities market or
trade reporting and quotation service.
History and Development of the Business
Intelisys is a corporation formed under the laws of Canada. The
business originally operated as a sole proprietorship in
Montreal, Quebec from 1983 until May 1999. In April of 1999, the
business was relocated to Shediac, New Brunswick in order to join
forces with Cynaptec, an IT integrator based there.
In January, 2001, Convergix Inc. was incorporated and Cynaptec
became a wholly owned subsidiary of Convergix. Convergix also
owned 53.1% of the issued and outstanding common shares of
Intelisys. Cynaptec owns the remaining 46.9% of Intelisys.
Intelisys and Cynaptec then embarked on a project to complete the
development of an integrated suite of airline management
software. The resulting comprehensive suite was branded as
"Amelia". To date, Convergix and its partners and stakeholders,
have invested in excess of$1,000,000 in the research &
development of the Amelia software suite of products.
In June 2001, under a new management team, the research and
development phase of Convergix was curtailed, and focus was
applied towards sales and marketing of its existing, developed
modules. Cynaptec's operations were wound down and its personnel
laid off. Presently, Convergix' principle business is providing
its software to its customer base for installation on the
customers' computer system or via the internet using Convergix'
computer system. Convergix currently provides services to 13
clients. Client contracts are generally for terms of thirty-six
to sixty months with fixed and volume-based charge components.
Products and Services
Software
Amelia enables air carriers to improve their operations by
providing solutions that are integrated, adaptable, and can be
deployed in a cost effective manner. In addition, Amelia assists
airline operators in key areas such as record keeping, regulatory
compliance, capacity planning and resource allocation while
managing maintenance requirements to seamlessly optimize
operations.
The Amelia software solution consists of four fully integrated
product-suites that address the operational needs of mid-size
airline and fleet operations:
" Flight Operations
" Reservations and Scheduling
" Human Resources
" Maintenance
The Amelia solution can be rapidly activated with airline
carriers going online in a matter of days or weeks. Amelia can
be installed directly at customer locations or through an
Application Service Provider (ASP) model via the Internet, using
Convergix' computer system. This ASP model allows Amelia
customers to avoid investment in expensive computer hardware. The
benefit to Intelisys is that the ASP model provides a revenue
stream over a number of years.
Hosting Services
The Amelia solution is provided to Convergix customers on a
hosted basis. The databases, applications, web services, e-
commerce and communication servers are maintained at Convergix'
on-site data center. This allows Convergix customers to fully
utilize the latest version of our software with minimal
additional investment hardware. The advantage to Convergix is
that it provides Convergix with a recurring revenue stream.
Custom Programming
Convergix derives significant revenues from custom programming
work whereby Convergix developers customize existing applications
for a specific client's configuration, or develop completely new
functionality.
Implementation Services
Convergix provides implementation support to its clients in order
to provide a smooth transition from the client's existing systems
to the Amelia solution. This requires significant time in
assessing the client's ability and capacity to adopt a new
solution and to determine the solutions scope and fit within the
client's organization. Follow up is provided to ensure training
was received in a timely manner and that the client is using all
aspects of the solution effectively. Implementation also
includes assisting the clients with their own infrastructure and
technical set-up.
Support
Convergix provides 24x7x365 technical and application support to
its clients. Primary method of contact is e-mail or MSN
Messenger. Telephone access is provided through Convergix' phone
system and forwarded to assigned technicians' mobile phones and
pagers for off-hours support. Convergix is the first response
support facility for all technical areas, including client side
infrastructure and communications issues.
Education and Training
Training is provided by a Convergix provided trainer. Typically,
this training is carried out at the client's site. Training is
also available through remote sessions during which the trainer
"shadows" the client side user, employing the shadow
functionality in the operating software. This permits the user
and the trainer to collaborate and work together in a single
session. Implementation and Training is available in English,
French, Spanish and German.
The Market
Convergix estimates that there are 25,728 air carriers in the
world. This includes all commercial, charter, passenger and
freight carriers, governments and certain law enforcement
agencies. This grouping can be further separated by size of
aircraft and total fleet makeup, as this clearly defines the
applicability of our solutions. This number can be broken down
further by segmenting them into the following categories:
" Carriers in the "Upper Tier" or Mega Carrier segment. These
are carriers with fleets containing aircraft with maximum gross
weights of 50,000 kilograms or more per aircraft. This clearly
defines the international carriers such as United Airlines,
British Airways, JAL and Lufthansa.
" 2,819 Carriers make up the "Middle Tier" or mid-sized
airline segment. These are carriers with fleets containing
smaller, regional aircraft with maximum gross weights between
6,000 and 50,000 kilogram's per aircraft. This defines smaller
international carriers like Aer Lingus on the high end of the
segment, down to smaller organizations such as Air Ambulance
operators.
" 1,959 Carriers make up the "Lower Tier" segment. These
are carriers with fleets containing small aircraft, typically
business jets and King Air, cabin-class turboprop aircraft. These
aircraft have a maximum gross weight of less than 6,000
kilograms.
" 1,450 Carriers make up the "Bottom Tier" segment. These
are small organizations operating single engine piston aircraft,
typical of flight schools and professionals requiring personal
aircraft for transportation.
" 3,000 Fixed Base Operators (Source: ACU-KWIK 2001)
" 3,299 Maintenance, Repair & Overhaul (MRO) facilities in
the U.S. (Source: Aviation Maintenance, July 2000)
" 13,105 Corporate operators and flight departments with a
total fleet size of over 22,000 corporate aircraft (Source: NBAA
Membership Review 2001)
Each of these segments, excluding the Upper Tier, is a target for
the Amelia suite of products. This results in a total potential
client market for Amelia well in excess of 25,000 organizations.
To date, Convergix' typical customer generates $56,000 in
recurring revenue annually. Initial one-time charges average
$18,000 per customer.
Prior to and subsequent to the events of September 11th, 2001 the
Upper Tier segment has been sustaining heavy financial losses.
However, despite the tragic events of September 11, 2001,
Convergix expects its target market, the mid to lower tier
segments, will grow.
Regulatory Environment
The Aviation Industry is one of the most highly regulated of all
industries. All carriers must adhere to the rigorous application
of regulations intended to keep the traveling public safe.
Carriers view these regulations as vital to assure the traveling
public safe conveyance in their aircraft. In order for a carrier
to maintain their legal ability to operate, they must certify
that they meet all regulatory requirements for crew utilization,
crew training, aircraft maintenance, and the planning and
operation of each flight. For all aspects discussed above, Amelia
provides efficient and approved systems allowing the carrier to
streamline their compliance processes in a cost-effective manner.
Amelia addresses each of these requirements, including the
following:
Crew Utilization: Regardless of jurisdiction and country of
enforcement, a crewmember is limited as to the number of hours
spent engaging in different aspects of their work. These time
elements are:
1. Duty Time - Time spent carrying out duties before,
during and after a flight.
2. Flight Time - Time between departure from the gate to
arrival at the gate and engine shutdown.
Crew Training: An operator is obligated to keep the training of
its crewmembers current. Failure to do so may result in the
operator's certificate being revoked. The operator must
demonstrate that they are accurately recording past training
histories and are able to project training requirements into the
future. There must also be a facility, which assures the carrier
that a crewmember with insufficient or expired training cannot
fly.
Aircraft Maintenance: Each component in the possession of a
carrier, whether installed on an aircraft or in inventory, must
be tracked. Each part is subject to various limitations, which
may run concurrently. The carrier is obligated to know the exact
accumulated time for each component so as not to exceed the
manufacturer's limitations. Additionally, all repair, overhaul
and refit information must be painstakingly tracked. Annually,
the carrier must submit to audits to verify the carrier's
compliance to these regulations. From time to time, the aircraft
manufacturer or the manufacturer of a component will issue an
Airworthiness Directive or a Service Bulletin. This obligates the
carrier to inspect, verify or replace a component or system.
Failure to comply with these regulations may result in suspension
or revocation of a carrier's certificate.
Planning and Operation of a Flight: In addition to crew and
aircraft safety, regulations are also in place to ensure the
proper procedures are followed in planning and operating a
flight. Prior to departure, an aircraft is "released" by the
maintenance department, and certified to be without defect. Once
an aircraft is released, its load is planned and the dispatchers
are required to develop a load plan and calculate the aircraft's
center of gravity based on the given load's distribution. Once
the aircraft is actually loaded, the center of gravity is
re-calculated based on the actual position of the passengers
and/or freight. If the aircraft is not within limitations or the
structural limits of the aircraft are exceeded in any way, the
aircraft is not permitted to depart. The final Weight and Balance
index values are required to be printed with one copy kept on
board, and another kept at the departing station.
An official certified Flight Plan must be developed and filed
with air traffic control and flow control authorities. The flight
plan dictates the route the flight shall take, fuel consumed en
route, arrival schedule and alternate airports. Forecast weather
observations and prognostications for the entire route and its
alternate airports are required to be on board the aircraft for
the flight.
Competition
Convergix competes in a marketplace with a large number of
vendors. These vendors range from small owner-managed operations
to large, well-financed international organizations. Aside from
the upper tier, in which Convergix does not compete, there is no
dominant vendor or organization. Convergix believes that the
majority of competitors and customers are using older technology
than that provided by Convergix.
Convergix estimates that there are currently 74 companies that
provide one or more of the services provided by Convergix.
Convergix believes that most of these competitors do not provide
as comprehensive a set of services as does Convergix. Convergix
considers the following companies to be its principal
competitors:
Camp Systems International
(U.K.) OpenSkies
Sabre (U.S.) Pentagon 2000
AIMS RESIII
AvBase Trax
DRBA Skyline
NavPak Competitor
The marketplace is highly competitive. Technology and its
applications within the aviation industry are in a rapid and
continual state of change. To be effective, Convergix must
continue to develop and market offerings that meet changing user
needs and respond to technological changes on a timely and cost
effective basis.
Operations
Convergix operates a fully redundant data center built and
maintained to banking standards imposed by clients such as Amex
Canada and Transport Canada. The excess capacity available
allows Convergix to host third party applications. The redundant
power, communication and environment systems allows Convergix to
host complex, sensitive and high-availability applications.
The data center consists of three Compaq server racks with ML-3xx
and Photon series servers. The production server consists of two
database, three application and two web server clusters providing
three-level hardware redundancy. Demonstration and evaluation
implementations are not hosted from the production environment.
For security, the data center has card access and video
surveillance as well as motion alarms connected to the facility's
monitored alarm system. Fire protection is provided by an FM-200
inert gas (halon-like) system. Backup power is provided via
three banks of hard-wired UPS's and an automatically engaged
diesel generator. Primary communication is provided via a
primary 2MB fiber optic link to the Internet; secondary
communication is provided by a 512KB frame relay connection.
Convergix estimates that it is utilizing approximately 5% of its
communications capacity and 10% of its computer system capacity.
No significant data center upgrades are anticipated for the
foreseeable future.
Marketing
Convergix intends to expand existing customer relationships by
introducing upgrade programs for customers, and strategically
positioning the "integrated suite" concept (i.e. selling other
parts of the Amelia suite to existing customers.
Marketing Strategies
Direct Marketing: Convergix currently markets its products and
services via a direct sales force, utilizing telemarketing and
direct mail.
Alliance Partner Strategy: Convergix is developing a program to
attract alliance partners who will market its products outside of
North America.
Advertising: Given that the market and prospects are readily
identifiable and industry players are very well documented,
Convergix focuses its advertising plan on Airline Industry
publications and journals highlighting specific major events and
trade shows.
Product Development
Convergix' product development platform is based on an Internet
architecture comprised of interconnected database servers,
application servers and client computers or devices running thin-
client software or web browsers. Internet computing allows
business information and applications to be managed from
centralized locations. End users can access their data and
applications through thin-client software or standard web
browsers. Database servers manage the underlying business
information, while application servers run the business
applications. Professional information technology managers
typically manage these servers. In contrast, traditional
client/server computing architectures require that each client
computer run and manage its own applications and also be updated
every time an application changes. We believe that the
network-centric design of our software for Internet computing
improves network performance and data quality and helps our
customers better control installation, maintenance and training
costs associated with information technology infrastructure.
Convergix will continue to enhance its existing products and
develop new products to meet the changing needs of its customers.
Intellectual Property and Other Proprietary Rights
Convergix relies primarily on a combination of copyright and
trademark laws, trade secrets, confidentiality procedures and
contractual provisions to protect its proprietary technology. For
example, Convergix licenses its software pursuant to signed
license agreements, which impose certain restrictions on the
licensees' ability to utilize the software. In addition,
Convergix seeks to avoid disclosure of its trade secrets,
including requiring those persons with access to Convergix'
proprietary information to execute confidentiality agreements
with Convergix and restricting access to Convergix' source code.
Convergix seeks to protect its software, documentation and other
written materials under trade secret and copyright laws, which
afford only limited protection.
Convergix has applied to register five trademarks to protect the
Amelia software system, one in Canada (application no. 1032998)
and four in the United States (applications nos. 76135724,
76135723, 76135722 and 76135721). Of these, the Canadian
application and one U.S. application (no. 76135724, for business
management consulting services) have been allowed (but not yet
registered); the other applications have been granted a first
extension of time to file a statement of use.
Despite Convergix' efforts to protect its proprietary rights,
unauthorized parties may attempt to copy aspects of Convergix'
products or to obtain and use information that Convergix regards
as proprietary. Policing unauthorized use of Convergix' products
is difficult, and, while Convergix is unable to determine the
extent to which piracy of its software products exists, software
piracy can be expected to be a persistent problem. In addition,
the laws of many countries do not protect Convergix' proprietary
rights to as great an extent as do the laws of the United States.
There can be no assurance that Convergix' means of protecting its
proprietary rights will be adequate or that Convergix'
competitors will not independently develop similar technology.
To date, Convergix has not been notified that Convergix' products
infringe the proprietary rights of third parties, but there can
be no assurance that third parties will not claim infringement by
Convergix with respect to current or future products. Convergix
expects that software product developers will increasingly be
subject to infringement claims as the number of products and
competitors in Convergix' industry segment grows and the
functionality of products in different industry segments
overlaps. Any such claims, with or without merit, could be
time-consuming, result in costly litigation, cause product
shipment delays or require Convergix to enter into royalty or
licensing agreements. Such royalty or licensing agreements, if
required, may not be available on terms acceptable to Convergix
or at all, which could have a material adverse effect upon
Convergix' business, operating results and financial condition.
Employees
As of October 31, 2002, Convergix employed 20 individuals, 16 of
whom were engaged in operations and customer service, 2 in sales,
marketing and related activities and 2 in finance and
administration. Convergix' success is highly dependent on its
ability to attract and retain qualified employees. The loss of
any of Convergix' senior management or other key sales and
marketing personnel could have a material adverse effect on
Convergix' business, operating results and financial condition.
Facilities
The Company's principal administrative, sales, marketing, support
and product development facility occupies 6600 square feet in
Shediac, New Brunswick, Canada. The lease expires on December 31,
2006. The Company believes that existing facilities are adequate
to support the Company's activities for the foreseeable future.
Security Ownership of Certain Beneficial Owners and Management
After the Acquisition of Convergix by Apta.
The following table sets forth the beneficial ownership of the
common shares of Convergix as of the date of this Information
Statement, giving proforma effect to the acquisition by Apta, by
each person who will beneficially own more than 5% of the common
stock, by each director and executive officer who will own shares
of common stock and by all directors and executive officers as a
group:
Shares of Percentage of
Common Stock Outstanding
Name and Address Beneficially Common Stock
of Position Owned Beneficially
Beneficial Owner Owned(1)
Ralph Eisenschmid Officer, 13,347,105 47.67%
(2) Director
65 Matheieu-
Martin
Grand Barachois
New Brunswick
Canada
E4P 7V7
Jock English Officer, 1,500,000 5.36%
113 Cap Brule Director
Road
Boudreau West,
New Brunswick
Canada E1P 6J1
Malcolm Little Officer, 25,000 0.09%
60 Methodist Director
Point Road
Mundleville New
Brunswick
Canada E4W 2L5
Lloyd Poirier Investor 2,295,000 8.20%
50 Poirier
Leblanc Road
Grand Digue New
Brunswick
Canada E4R 4R3
Mohamed Juman Investor 2,666,667 9.52%
PO Box 743
Manama
Kingdom of
Bahrain
All Directors and 14,872,105 53.11%
Officers as a
group
(2 persons)
(1) Based upon 28,000,000 shares outstanding as of the date of
this Information Statement, and giving proforma effect to the
proposed acquisition of Convergix by Apta.
(2) Includes 783,333 shares owned by Charlene Eisenschmid, wife
of Ralph Eisenschmid.
Management
The directors and executive officers of Convergix are as follows:
Name Age Title
Ralph Eisenschmid 36 President, Director
Jock English 53 Vice President, Sales &
Marketing, Director
Malcolm Little 36 Chief Technology Officer,
Director
Ralph Eisenschmid - Founder/President
Mr. Eisenschmid created the Intelisys / Amelia concept in 1987.
Over the past 14 years he has led the sales, implementation and
development of a broad range of software for the operation and
management of 19 mid-sized airlines. Prior to his career in
aviation, he co-founded a software joint venture that developed
and implemented innovative solutions for industries that included
travel services, transportation, construction, and
pharmaceuticals. Mr. Eisenschmid was instrumental in designing,
organizing, and implementing a new operating division of a
domestic airline to manage the operational needs of an
international tour operator. As well as being a proven systems
analyst and programmer, he has had experience as a licensed
multi-engine commercial airline pilot. Mr. Eisenschmid speaks
three languages, and has extensive real-world business experience
implementing and supporting high performance airline technology
solutions internationally.
Jock English - Vice President, Sales and Marketing
Mr. English has over 20 years experience in software development,
marketing and sales. His primary experience has been in managing
both sales and marketing of mission critical enterprise software
systems for both U.S. and Canadian software firms. During his
employment with a U.S. based Fortune 300 software firm Mr.
English was responsible for product introduction and initial
sales activities for a family of software products to markets in
over 50 countries. Mr. English is a registered professional
engineer in Canada and a holds both U.S. and Canadian private
pilots licenses.
Malcolm Little - Chief Technology Officer
Mr. Little presently serves as the senior Amelia software project
manager and chief technology officer for Convergix. He has
demonstrated a high rate of success in proposing, budgeting,
staffing, and implementing large-scale software projects. Prior
to Convergix he served as Senior Project Manager for EDS
Systemhouse where he managed large teams of Oracle resources in
postproduction database support, application development and
package integration. Mr. Little has eight years experience in
project management, cost/benefit analysis, budget management,
testing, implementing and training for large software development
projects. Mr. Little holds undergraduate degrees in engineering
and computer science, and a M.Sc. in Computer Science.
Convergix does not have audit, nominating or compensation
committees.
The directors and officers of Convergix are currently not parties
to any pending legal proceedings, including but not limited to
bankruptcy or receivership proceedings, and are not parties to
any material proceeding as a party adverse to the Company or
Convergix or in which they have a material interest adverse to
the Company or Convergix.
During the past five years none of the directors and officers of
Convergix has been involved in:
1. Any bankruptcy petition filed by or against any business of
which such person was a general partner or executive officer
either at the time of the bankruptcy or within two years
prior to that time;
2. Any conviction in a criminal proceeding or being subject to
a pending criminal proceeding (excluding traffic violations
and other minor offenses) ;
3. Being subject to any order, judgment, or decree, not
subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily
enjoining, barring, suspending or otherwise limiting his
involvement in any type of business, securities or banking
activities; and
4. Being found by a court of competent jurisdiction (in a civil
action) , the Securities and Exchange Commission (or any
Canadian equivalent) or the Commodity Futures Trading
Commission to have violated a federal or state securities or
commodities law, and the judgment has not been reversed,
suspended, or vacated.
Executive Compensation
Executive Compensation Summary Table
The following table sets forth all information concerning total
compensation earned or paid to the officers of Convergix who
served in such capacities as of December 31, 2000 and 2001 for
services rendered to Convergix during each of those fiscal years.
Summary Compensation Table
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------- ------ -------
Other Securities Long-
Name and Annual Restricted Underlying Term All other
Principle Compen- Stock Options Incentive compen-
Position Year Salary ($) Bonus ($) sation ($) Awards ($) ($) Plans ($) sation ($)
- --------- ---- ---------- --------- ---------- ----------- --------- --------- ----------
Ralph 2000 41,600 0 0 0 0 0 0
Eisenschmid,
President 2001 41,600 0 0 0 0 0 0
Jock 2000 36,400 0 0 0 0 0 0
English,
VP Sales 2001 36,400 0 0 0 0 0 0
&
Marketing
Malcolm 2000 64,000 0 0 0 0 0 0
Little,
CTO 2001 36,400 0 0 0 0 0 0
Compensation of Directors
There are no arrangements for the compensation of Directors for
any services provided as a director including committee
participation or special assignments.
Employment Agreements
Convergix, Intelisys and Cynaptec currently have no employment
agreements with their executive officers. Officers are
compensated for services as the services are rendered.
Option / SAR Grants, Aggregated Option/SAR Exercises and Option /
SAR Repricings
No options were granted or exercised during the year ending
December 31, 2001. Convergix does not have any stock options
issued and outstanding.
Material Contracts
The following is a list of the material contracts to which
Convergix and/or its subsidiaries are parties as of the date of
this Information Statement. Stockholders of the Company may view
copies of these contracts at the head office of Convergix during
normal business hours.
1. Master Agreement and Subscription Agreement with Compaq
Cayman Islands Investment Company dated January 22, 2001.
Compaq Cayman Islands Investment Company entered into an
agreement with Convergix and others on January 22, 2001 in
which Compaq purchased 117.7 shares of Convergix Series I
Preference Shares for an aggregate purchase price of CDN$2
million (approximately $1,280,000 US). In connection with
this investment, Compaq was granted numerous rights which
could have a material impact on the Company subsequent to
the acquisition of Convergix. These include the right: to
redeem the Preference Shares for the initial purchase price;
to convert the Convergix Series I Preference Shares to Ten
Percent of the common stock of Convergix at the time of
conversion; and various restrictions on the operations of
the business of Convergix and its subsidiaries.
Convergix is in default of such agreement, and Compaq has
additional rights as a result of such default. Prior to the
merger of Compaq and Hewlett-Packard, Convergix had begun
discussions with Compaq with respect to settlement of this
matter. Such discussions have not yet been furthered
subsequent to such merger, but will be pursued. However, it
is unlikely that the matter will be resolved prior to the
closing of the acquisition by Apta
2. Share Purchase Agreement between Cynaptec Informatin Systems
Inc. and the Province of New Brunswick dated February 29,
2000. The Province of New Brunswick purchased 250 Class A
Preferred Shares for a purchase price of CDN $250,000. The
Shares carry an annual dividend rate of zero percent for the
first year and a cumulative dividend rate of six percent
thereafter. The Shares are non-voting and non-
participating. The Shares are redeemable by Cynaptec during
the first two years after issuance at face value plus unpaid
cumulative dividends. Thereafter, the Shares are redeemable
at the face value plus unpaid cumulative dividends, plus an
amount equal to 10 percent of the retained earnings of
Cynaptec on the last day of the prior fiscal year. The
Shares must be redeemed within five years of the date of
issuance.
3. Lease Agreement dated with Place 815 Bombardier Inc.
February 2002.
Convergix is leasing its 6,600 sq. ft. head office and
principal place of business for $7052 per month. The lease
expires on December 31, 2006. The lease gives Convergix the
right to match any offer received by the landlord for the
purchase of the premises during the term of the lease.
4. Forbearance Agreement with Royal Bank of Canada dated August
1, 2002. Convergix is in default under this agreement and
the Royal Bank has requested payment, but has not yet
commenced action. The amount owed is approximately $150,000.
Legal Proceedings
To date, Convergix and its subsidiaries are parties to the
following material legal proceedings:
Convergix is subject to orders of the Director under the
Employment Standards Act (New Brunswick) to pay a total of
$38,300 to nine former employees on account of termination pay.
Over one-half of this sum has been paid to date.
Convergix is in arrears with the Canadian Customs and Revenue
Agency for unpaid taxes. Payments have been made against the
arrears and Convergix has kept the account current since August
1, 2002. The CCRA has not taken action as yet.
Selected Financial Data
September 30, December 31,
2002 2001
Net Sales/Operating Revenues 317,147 149,671
(Loss) from Operations (883,900) (1,230,291)
(Loss) from Discontinued (244,050) (241,095)
Operations
Net (Loss) (1,127,950) (1,792,335)
Net (Loss) per share (0.05) (0.08)
Total Assets 753,450 966,280
Total Liabilities 3,430,263 2,529,834
Deficit Net Worth (2,834,463) (1,720,503)
Plan of Operations
Convergix' goal is to be a leading provider of software solutions
and hosting services to small and mid-sized airlines and aircraft
fleet operators. To meet that goal, Convergix invested over
$1,000,000 to develop an integrated software solution called
Amelia. In addition, believing that it would be a competitive
advantage to offer its software to its customers over the
internet utilizing Convergix's computer mainframe, Convergix
invested over $600,000 in computer hardware, software and related
infrastructure. The development of the software and the
integration of the computer hardware cost more and took longer
than originally planned. As a result, Convergix has incurred
significant operating losses over the past two fiscal years, and
over the nine-month period ending September 30, 2002.
Cumulatively, Convergix has lost $4,229,774. Convergix's balance
sheet is highly leveraged. As of September 30, 2002, its
liabilities exceeded its assets by $2,834,463. Convergix has not
been able to meet its obligations as they come due. However, now
that the development of the software and hardware is
substantially complete and marketing efforts are well underway,
Convergix believes it will be able to improve its financial
results for the following reasons:
1. Convergix has been successful selling its products and
services since marketing efforts commenced in June 2001. To
date, Convergix has signed contracts with 13 customers,
which will provide significant revenues in the future. Given
its track record with these customers, Convergix expects to
be successful in its efforts to attract additional
customers.
2. Based on its existing contracts and the rate at which
Convergix expects to sign new contracts, Convergix
anticipates a positive cash flow from operations by June 30,
2003. Convergix's revenues have steadily increased since
marketing efforts began in June 2001. Convergix does not
anticipate significant increases in fixed costs for the
foreseeable future. It estimates that it is only utilizing
10% of its computer system capacity and 5% of its
telecommunications system capacity. No assurance can be
given that Convergix will in fact be cash flow positive by
June 30, 2003.
3. Convergix has informal agreements with most of its creditors
that will allow Convergix to continue to function as a going
concern.
4. Convergix anticipates that it will be able to secure equity
and debt financing that will be used to pay down some of its
debt and to enhance its ability to continue as a going
concern. Convergix has no current arrangements with respect
to, or sources of, additional financing, and there can be no
assurance that additional financing will be available to
Convergix on commercially reasonable terms, if at all.
During the fiscal year ending December 31, 2001, Convergix
emerged from a development stage enterprise, having completed the
development of a new, fully integrated suite of aviation
enterprise software known as "Amelia". Convergix started
realizing revenue from the sale of Amelia on September 1, 2001.
Convergix reported revenues of $228,533. Operating expenses from
continuing operations were $1,533,017. Interest expense for the
year was $76,974. Convergix lost $298,833 on discontinued
operations and incurred income tax expense of $293,832. The net
loss from operations was $1,994,123.
During the nine months ending September 30, 2002, Convergix
reported $317,147 in revenues, a significant increase in revenues
over the comparable prior period. Revenues have continuously
increased since marketing efforts began in June 2001. Operating
expenses were $1,110,927, a $218,510 decrease over the prior
comparable period. Convergix incurred $90,120 in interest
expense during the period. Convergix lost $244,050 on a
discontinued operation. The loss from discontinued operations is
expected to decline significantly going forward. The net loss
for the period was $1,127,950.
Convergix plans to continue to aggressively pursue sales while
controlling costs so as to achieve a positive cash flow from
operations by June 30, 2003. No assurance can be given that
Convergix will in fact be cash flow positive by June 30, 2003.
Convergix also intends to pursue sources of equity and debt
financing and to use the proceeds to pay down its existing
obligations, many of which are in default. Convergix has no
current arrangements with respect to, or sources of, additional
financing, and there can be no assurance that additional
financing will be available to Convergix on commercially
reasonable terms, if at all.
Additional Information
Apta files regular reports with the Securities and Exchange
Commission (the "Commission"), including a registration statement
on Form 10-SB (the "Registration Statement") under the Securities
Act. This Information Statement does not contain all of the
information set forth in the Registration Statement and the
exhibits and schedules filed therewith, or any subsequently filed
reports. For further information with respect to Apta, the
Registration Statement, including all exhibits and schedules
thereto, and any other forms Apta may file from time to time with
the SEC, may be inspected without charge at the principal office
of the Commission, 450 Fifth Street, N.W., Washington , D.C.,
20549, and at the regional offices of the Commission located at
233 Broadway, New York, New York, 10279 and 500 West Madison
Street, Chicago, Illinois, 60661-2511, and copies of all or any
part thereof may be obtained from such offices, upon the payment
of proscribed fees; or can be downloaded from the SEC's website
at: http://www.sec.gov.
You can view and download a copy of the Share Exchange Agreement
and related documents which was filed with the United States
Securities and Exchange Commission on November 20, 2002 as an
exhibit to this Information Statement filed by Apta at the
following internet address, or we will provide a copy of the
Agreement to you upon request made to our head office at the
address and telephone number provided at the beginning of this
information statement:
http://www.sec.gov
Apta's common stock is approved for quotation on the NASD OTC
Bulletin Board under the symbol APTA. As of the date of this
Information Statement, quotations were submitted by five market
markers and there has been minimal public trading of Apta's stock
at prices ranging from $.25 to $.85 per share.
EXHIBIT "A"
Delaware Corporations Code Section 262 (Appraisal Remedy for
Shareholders)
Section 262. Appraisal rights.
a) Any stockholder of a corporation of this State who holds
shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who
continuously holds such shares through the effective date of the
merger or consolidation, who has otherwise complied with
subsection (d) of this section and who has neither voted in favor
of the merger or consolidation nor consented thereto in writing
pursuant to Section 228 of this title shall be entitled to an
appraisal by the Court of Chancery of the fair value of the
stockholder's shares of stock under the circumstances described
in subsections (b) and (c) of this section. As used in this
section, the word "stockholder" means a holder of record of stock
in a stock corporation and also a member of record of a nonstock
corporation; the words "stock" and "share" mean and include what
is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and
the words "depository receipt" mean a receipt or other instrument
issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation,
which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any
class or series of stock of a constituent corporation in a merger
or consolidation to be effected pursuant to Section 251 (other
than a merger effected pursuant to Section 251(g) of this title),
Section 252, Section 254, Section 257, Section 258, Section
263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series
of stock, which stock, or depository receipts in respect thereof,
at the record date fixed to determine the stockholders entitled
to receive notice of and to vote at the meeting of stockholders
to act upon the agreement of merger or consolidation, were either
(I) listed on a national securities exchange or designated as a
national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or
(ii) held of record by more than 2,000 holders; and further
provided that no appraisal rights shall be available for any
shares of stock of the constituent corporation surviving a merger
if the merger did not require for its approval the vote of the
stockholders of the surviving corporation as provided in
subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal
rights under this section shall be available for the shares of
any class or series of stock of a constituent corporation if the
holders thereof are required by the terms of an agreement of
merger or consolidation pursuant to Sections 251, 252, 254, 257,
258, 263 and 264 of this title to accept for such stock anything
except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or depository
receipts in respect thereof) or depository receipts at the
effective date of the merger or consolidation will be either
listed on a national securities exchange or designated as a
national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or
held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of
this paragraph; or
d. Any combination of the shares of stock, depository receipts
and cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a., b. and c.
of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under Section 253 of this
title is not owned by the parent corporation immediately prior to
the merger, appraisal rights shall be available for the shares of
the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of
incorporation that appraisal rights under this section shall be
available for the shares of any class or series of its stock as a
result of an amendment to its certificate of incorporation, any
merger or consolidation in which the corporation is a constituent
corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains
such a provision, the procedures of this section, including those
set forth in subsections (d) and (e) of this section, shall apply
as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal
rights are provided under this section is to be submitted for
approval at a meeting of stockholders, the corporation, not less
than 20 days prior to the meeting, shall notify each of its
stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available
pursuant to subsection (b) or (c) hereof that appraisal rights
are available for any or all of the shares of the constituent
corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of
such stockholder's shares shall deliver to the corporation,
before the taking of the vote on the merger or consolidation, a
written demand for appraisal of such stockholder's shares. Such
demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such
stockholder's shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder
electing to take such action must do so by a separate written
demand as herein provided. Within 10 days after the effective
date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not
voted in favor of or consented to the merger or consolidation of
the date that the merger or consolidation has become effective;
or
(2) If the merger or consolidation was approved pursuant to
Section 228 or Section 253 of this title, then either a
constituent corporation before the effective date of the merger
or consolidation or the surviving or resulting corporation within
10 days thereafter shall notify each of the holders of any class
or series of stock of such constituent corporation who are
entitled to appraisal rights of the approval of the merger or
consolidation and that appraisal rights are available for any or
all shares of such class or series of stock of such constituent
corporation, and shall include in such notice a copy of this
section. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such
stockholders of the effective date of the merger or
consolidation. Any stockholder entitled to appraisal rights may,
within 20 days after the date of mailing of such notice, demand
in writing from the surviving or resulting corporation the
appraisal of such holder's shares. Such demand will be sufficient
if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand
the appraisal of such holder's shares. If such notice did not
notify stockholders of the effective date of the merger or
consolidation, either (I) each such constitutent corporation
shall send a second notice before the effective date of the
merger or consolidation notifying each of the holders of any
class or series of stock of such constitutent corporation that
are entitled to appraisal rights of the effective date of the
merger or consolidation or (ii) the surviving or resulting
corporation shall send such a second notice to all such holders
on or within 10 days after such effective date; provided,
however, that if such second notice is sent more than 20 days
following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to
appraisal rights and who has demanded appraisal of such holder's
shares in accordance with this subsection. An affidavit of the
secretary or assistant secretary or of the transfer agent of the
corporation that is required to give either notice that such
notice has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice,
each constitutent corporation may fix, in advance, a record date
that shall be not more than 10 days prior to the date the notice
is given, provided, that if the notice is given on or after the
effective date of the merger or consolidation, the record date
shall be such effective date. If no record date is fixed and the
notice is given prior to the effective date, the record date
shall be the close of business on the day next preceding the day
on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any
stockholder who has complied with subsections (a) and (d) hereof
and who is otherwise entitled to appraisal rights, may file a
petition in the Court of Chancery demanding a determination of
the value of the stock of all such stockholders. Notwithstanding
the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have
the right to withdraw such stockholder's demand for appraisal and
to accept the terms offered upon the merger or consolidation.
Within 120 days after the effective date of the merger or
consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written
request, shall be entitled to receive from the corporation
surviving the merger or resulting from the consolidation a
statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which
demands for appraisal have been received and the aggregate number
of holders of such shares. Such written statement shall be mailed
to the stockholder within 10 days after such stockholder's
written request for such a statement is received by the surviving
or resulting corporation or within 10 days after expiration of
the period for delivery of demands for appraisal under subsection
(d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder,
service of a copy thereof shall be made upon the surviving or
resulting corporation, which shall within 20 days after such
service file in the office of the Register in Chancery in which
the petition was filed a duly verified list containing the names
and addresses of all stockholders who have demanded payment for
their shares and with whom agreements as to the value of their
shares have not been reached by the surviving or resulting
corporation. If the petition shall be filed by the surviving or
resulting corporation, the petition shall be accompanied by such
a duly verified list. The Register in Chancery, if so ordered by
the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the
surviving or resulting corporation and to the stockholders shown
on the list at the addresses therein stated. Such notice shall
also be given by 1 or more publications at least 1 week before
the day of the hearing, in a newspaper of general circulation
published in the City of Wilmington, Delaware or such publication
as the Court deems advisable. The forms of the notices by mail
and by publication shall be approved by the Court, and the costs
thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine
the stockholders who have complied with this section and who have
become entitled to appraisal rights. The Court may require the
stockholders who have demanded an appraisal for their shares and
who hold stock represented by certificates to submit their
certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any
stockholder fails to comply with such direction, the Court may
dismiss the proceedings as to such stockholder.
(h) After determining the stockholders entitled to an appraisal,
the Court shall appraise the shares, determining their fair value
exclusive of any element of value arising from the accomplishment
or expectation of the merger or consolidation, together with a
fair rate of interest, if any, to be paid upon the amount
determined to be the fair value. In determining such fair value,
the Court shall take into account all relevant factors. In
determining the fair rate of interest, the Court may consider all
relevant factors, including the rate of interest which the
surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon
application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding,
the Court may, in its discretion, permit discovery or other
pretrial proceedings and may proceed to trial upon the appraisal
prior to the final determination of the stockholder entitled to
an appraisal. Any stockholder whose name appears on the list
filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted such
stockholder's certificates of stock to the Register in Chancery,
if such is required, may participate fully in all proceedings
until it is finally determined that such stockholder is not
entitled to appraisal rights under this section.
(I) The Court shall direct the payment of the fair value of the
shares, together with interest, if any, by the surviving or
resulting corporation to the stockholders entitled thereto.
Interest may be simple or compound, as the Court may direct.
Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of
holders of shares represented by certificates upon the surrender
to the corporation of the certificates representing such stock.
The Court's decree may be enforced as other decrees in the Court
of Chancery may be enforced, whether such surviving or resulting
corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court
and taxed upon the parties as the Court deems equitable in the
circumstances. Upon application of a stockholder, the Court may
order all or a portion of the expenses incurred by any
stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the
value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded appraisal rights
as provided in subsection (d) of this section shall be entitled
to vote such stock for any purpose or to receive payment of
dividends or other distributions on the stock (except dividends
or other distributions payable to stockholders of record at a
date which is prior to the effective date of the merger or
consolidation); provided, however, that if no petition for an
appraisal shall be filed within the time provided in subsection
(e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such
stockholder's demand for an appraisal and an acceptance of the
merger or consolidation, either within 60 days after the
effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder
to an appraisal shall cease. Notwithstanding the foregoing, no
appraisal proceeding in the Court of Chancery shall be dismissed
as to any stockholder without the approval of the Court, and such
approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to
which the shares of such objecting stockholders would have been
converted had they assented to the merger or consolidation shall
have the status of authorized and unissued shares of the
surviving or resulting corporation.
(8 Del. C. 1953, Section 262; 56 Del. Laws, c. 50; 56 Del. Laws,
c. 186, Section 24; 57 Del. Laws, c. 148, Sections 27-29; 59 Del.
Laws, c. 106, Section 12; 60 Del. Laws, c. 371, Sections 3-12; 63
Del. Laws, c. 25, Section 14; 63 Del. Laws, c. 152, Sections 1,
2; 64 Del. Laws, c. 112, Sections 46-54; 66 Del. Laws, c. 136,
Sections 30-32; 66 Del. Laws, c. 352, Section 9; 67 Del. Laws, c.
376, Sections 19, 20; 68 Del. Laws, c. 337, Sections 3, 4; 69
Del. Laws, c. 61, Section 10; 69 Del. Laws, c. 262, Sections 1-9;
70 Del. Laws, c. 79, Section 16; 70 Del. Laws, c. 186, Section 1;
70 Del. Laws, c. 299, Sections 2, 3; 70 Del. Laws, c. 349,
Section 22; 71 Del. Laws, c. 120, Section 15; 71 Del. Laws, c.
339, Sections 49-52; 73 Del. Laws, c. 82, Section 21.)
UNAUDITED HISTORICAL
FINANCIAL STATEMENTS
OF
CONVERGIX, INC.
PRO FORMA FINANCIAL DATA
APTA HOLDINGS, INC. AND CONVERGIX, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
The Unaudited Pro Forma Condensed Combined Statements of Operations
combine the historical consolidated statements of operations of Apta
and Convergix, giving effect to the merger as if it had occurred
on January 1, of each period presented. The Unaudited Pro Forma
Condensed Combined Balance Sheet combines the historical
consolidated balance sheet of Apta and the historical
consolidated balance sheet of Convergix, giving effect to the
merger as if it had been consummated on September 30, 2002. We
have adjusted the historical consolidated financial information
to give effect to pro forma events that are (1) directly
attributable to the merger, (2) factually supportable, and (3)
with respect to the statements of income, expected to have a
continuing impact on the combined results. You should read this
information in conjunction with the:
* accompanying notes to the Unaudited Pro Forma Condensed
Combined Financial Statements
* separate historical unaudited financial statements of
Apta as of and for the nine months ended September 30,
2002 and 2001 included in Apta's Quarterly Report on
Form 10-QSB for the nine month period ended September
30, 2002, which is incorporated by reference into this
document;
* separate historical financial statements of Apta as of
and for the years ended December 31, 2001 and 2000
included in Apta's Annual Report on Form 10-KSB for
the years ended December 31, 2001, which is
incorporated by reference into this document;
* separate historical unaudited financial statements of
Convergix as of and for the nine months ended September
30, 2002 and 2001 included herein;
* separate historical unaudited financial statements of
Convergix as of and for the years ended December 31,
2001 and 2000 included herein;
* separate historical financial statements of Convergix
for the years ended December 31, 2001 and 2000 included
in Apta's Current Report on Form 8-K to be filed
related to the acquisition of Convergix.
We present the unaudited pro forma condensed combined financial
information for informational purposes only. The pro forma
information is not necessarily indicative of what our financial
position or results of operations actually would have been had we
completed the merger at the dates indicated. In addition, the
unaudited pro forma condensed combined financial information does
not purport to project the future financial position or operating
results of the combined company.
The unaudited pro forma condensed combined financial information
was prepared using the purchase method of accounting with
Convergix treated as the acquirer (a reverse acquisition).
Accordingly, Convergix' cost to acquire Apta will be allocated to
the assets acquired and liabilities assumed based upon their
estimated fair values as of the date of acquisition. The
allocation is dependent upon certain valuations and other studies
that have not progressed to a stage where there is sufficient
information to make a definitive allocation. Accordingly, the
purchase price allocation pro forma adjustments are preliminary
and have been made solely for the purpose of providing unaudited
pro forma condensed combined financial information.
F-1
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
As of September 30, 2002
ASSETS
Apta Pro Forma
Holdings, Convergix, Merger Pro Forma
Inc. Inc. Adjustments Combined
----------- ----------- ---------- ------------
Current assets
Cash $ 2,857 $ 0 $( 2,857)a $ 0
Receivables 263,191 178,906 (263,191)a 178,906
Prepaid expenses 1,545 13,079 ( 1,545)a 13,079
----------- ----------- ---------- ------------
Total current
assets 267,593 191,985 (267,593) 191,985
Capital assets - net 3,436 561,454 ( 3,436)a 561,454
Intangible assets 0 11 300,000 b 300,011
----------- ----------- ---------- ------------
TOTAL ASSETS $ 271,029 753,450 28,971 1,053,450
=========== =========== ========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Bank debt $ 0 $ 77,135 $ 0 $ 77,135
Payables and accruals 5,493 1,613,286 ( 5,493)a 1,613,286
Deferred revenue 0 24,152 0 24,152
Stock repurchase
agreement 0 0 318,450 d 318,450
Current portion long
term debt 0 330,000 0 330,000
----------- ----------- ---------- ------------
Total current
liabilities 5,493 2,044,573 312,957 2,363,023
Other liabilities
Convertible debt 0 646,775 (636,582)d 10,193
Long term debt 0 738,915 0 738,915
----------- ----------- ---------- ------------
Total other
liabilities 0 1,385,690 (636,582) 749,108
Minority interest 29,669 157,650 1,231,531 a,c,f 1,418,850
Stockholders' equity
(deficit) a,b,c,
Capital stock 2,315 1,261,428 (1,235,743)d,e,f 28,000
Additional paid-in
capital 400,185 0 190,175 a,b,d,f 590,360
Currency translation
adjustment 0 133,883 0 133,883
Accumulated deficit ( 166,633)(4,229,774) 166,633 a (4,229,774)
----------- ----------- ---------- ------------
Total
stockholders'
equity (deficit) 235,867 (2,834,463)( 878,935) (3,477,531)
----------- ----------- ---------- ------------
TOTAL LIABILITIES AND
STOCKHOLDERS'
EQUITY (DEFICIT) $ 271,029 $( 753,450) $ 28,971 $1,053,450
========== =========== ========== ============
F-2
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2002
Apta Pro Forma
Holdings, Convergix, Merger Pro Forma
Inc. Inc. Adjustments Combined
----------- ----------- ---------- ------------
Revenues $ 32,372 $ 317,147 $( 32,372)a $ 317,147
Selling, general
and administrative
expenses 44,935 1,110,927 ( 21,521)a 1,134,341
Research and
development expenses 0 0 0 0
--------- ----------- ---------- ------------
(Loss) before interest
expenses ( 12,563) ( 793,780) 10,851 ( 817,194)
Interest expense, net 3,875 90,120 ( 3,875)a 90,120
--------- ----------- ---------- ------------
(Loss) before
discontinued
operations and
income taxes ( 16,438) ( 883,900) 6,976 ( 907,314)
(Loss) on
discontinued
operations 0 ( 244,050) 0 ( 244,050)
Minority interest 125 0 ( 125)a 0
Income tax expense 0 0 0 0
--------- ----------- ---------- ------------
Net (loss) $( 16,313) $(1,127,950) 7,101 $(1,151,364)
========= =========== ========== ============
Net loss per share $( 0.01) $( 0.05) $( 0.04)
========= =========== ============
Weighted average
shares used to
calculated earnings
per common share
amounts 2,315,000 25,000,000 685,000 28,000,000
========== =========== ========== ============
F-3
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2001
Apta Pro Forma
Holdings, Convergix, Merger Pro Forma
Inc. Inc. Adjustments Combined
----------- ----------- ---------- ------------
Revenues $ 63,673 $ 228,533 $( 63,673)a $ 228,533
Selling, general
and administrative
expenses 98,304 1,478,458 ( 34,766)a 1,541,996
Research and
development expenses 0 74,559 0 74,559
--------- ----------- ---------- ------------
(Loss) before interest
expenses ( 34,631) (1,324,484) 28,907 (1,388,022)
Interest expense, net 12,127 76,974 ( 12,127)a 76,974
--------- ----------- ---------- ------------
(Loss) before
discontinued
operations and
income taxes ( 46,758) (1,401,458) 16,780 (1,464,996)
(Loss) on
discontinued
operations 0 ( 298,833) ( 298,833)
Minority interest ( 1,431) 0 ( 1,431)a 0
Income tax expense 0 293,832 293,832
--------- ----------- ---------- ------------
Net (loss) $( 48,189) $(1,994,123) 15,349 $(2,057,661)
========= =========== ========== ============
Net loss per share $( 0.02) $( 0.08) $( 0.07)
========= =========== ============
Weighted average
shares used to
calculated earnings
per common share
amounts 2,315,000 25,000,000 685,000 28,000,000
========== =========== ========== ============
F-4
NOTES TO UNAUDITED PROFORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
1. Description of Transaction and Basis of Presentation
The Exchange Agreement provides that each outstanding share of Convergix
common stock will be exchanged for one share of Apta common stock.
Pursuant to the agreement, Apta will issue 25,000,000 common shares
(or common share equivalents.
The unaudited proforma condensed combined financial statements were
prepared using the purchase method of accounting, with Convergix treated
as the acquirer (a reverse acquisition). Accordingly, Convergix' cost
to acquire Apta will be allocated to the assets acquired and liabilities
assumed based upon their estimated fair values as of the date of
acquisition. The allocation is dependent upon certain valuations and
other studies that have not progressed to a stage where there is
sufficient information to make a definitive allocation. Accordingly,
the purchase price allocation proforma adjustments are preliminary,
and have been made solely for the purpose of providing unaudited
proforma condensed combined financial information.
2. Purchase Price
The following is a preliminary estimate of the purchase price for Apta:
Number of shares held by Apta shareholders: 3,000,000
Multiplied by estimated value per share .10
---------
$ 300,000
No tangible assets were acquired from Apta.
The above estimated purchase price was allocated to goodwill.
3. Proforma Adjustments
(a) To eliminate results of discontinued operations of Apta
Twelve Nine
Months Months
2001 2002
------- -------
Revenues $(63,673) $( 32,372)
Selling, general and
administrative
expenses (34,766) ( 21,521)
Interest expense, net (12,127) ( 3,875)
Minority Interest 1,431 ( 125)
September 30
2002
-----------
Cash $( 2,857)
Receivables (263,191)
Prepaid expenses ( 1,545)
Capital assets ( 3,436)
Payables and accruals ( 5,493)
Minority interest ( 29,669)
Common stock ( 2,315)
Additional paid in capital (400,185)
Accumulated deficit 166,633
F-5
(b) To record acquisition of Apta (a reverse acquisition)
September 30
2002
-----------
Other intangibles $ 300,000
Common stock 3,000
Additional paid in capital 297,000
(c) To reclassify preferred stock in Convergix not acquired
September 30
2002
-----------
Minority interests $1,261,200
Capital stock (1,261,200)
(d) To eliminate debt converted into equity
September 30
2002
-----------
Stock repurchase agreement $ 318,450
Convertible debt ( 636,582)
Common stock 318,132
(e) To reclass capital to reflect 25,000,000 shares of Apta stock
held by Convergix shareholders at $.001 par value
September 30
2002
-----------
Capital stock $( 318,360)
Additional paid in capital 318,360
Capital stock 25,000
Additional paid in capital ( 25,000)
(f) The net effect of the above adjustments is summarized below:
Minority interest
(a) Eliminate discontinued operations of Apta ( 29,669)
(c) Reclassify preferred stock in Convergix
not acquired 1,261,200
-----------
Net effect of a+c 1,231,531
===========
Capital stock
(a) Eliminate discontinued operations of Apta ( 2,315)
(b) Record acquisition of Apta (reverse acquisition) 3,000
(c) Reclassify preferred stock in Convergix
not acquired ( 1,261,200)
(d) Eliminate debt converted to equity 318,132
(e) Reclass capital to reflect 25,000,000 shares
of Apta stock held by Convergix shareholders ( 318,360)
at $.001 par value 25,000
-----------
Net effect a+b+c+d+e ( 1,235,743)
===========
F-6
(f) The net effect of the above adjustments (continued)
Additional paid-in capital
(a) Eliminate discontinued operations of Apta ( 400,185)
(b) Record acquisition of Apta (reverse
acquisition) 297,000
(e) Reclass capital to reflect 25,000,000
shares of Apta stock held by Convergix 318,360
shareholders at $.001 per share ( 25,000)
---------
Net effect of a+b+e 190,175
=========
F-7
UNAUDITED HISTORICAL FINANCIAL STATEMENTS OF CONVERGIX, INC.
Unaudited Historical Consolidated Balance Sheets
as of September 30, 2002 and December 31, 2001
Unaudited Historical Consolidated Statement of Operations
for the nine months ended September 30, 2002 and 2001
Unaudited Historical Consolidated Statements of Cash Flows
for the nine months ended September 30, 2002 and 2001
Unaudited Historical Consolidated Statements of Changes
in Stockholders Deficit for the nine months ended
September 30, 2002 and 2001
Unaudited Historical Consolidated Balance Sheets
for the fiscal years ended December 31, 2001 and 2000
Unaudited Historical Consolidated Statement of Operations
for the fiscal years ended December 31, 2001 and 2000
Unaudited Historical Consolidated Statement of Cash Flows
for the fiscal years ended December 31, 2001 and 2000
Unaudited Historical Consolidated Statement of Changes
in Stockholders Deficit for the fiscal years ended
December 31, 2001 and 2000
F-8
UNAUDITED HISTORICAL CONSOLIDATED BALANCE SHEETS
OF CONVERGIX, INC.
AS OF SEPTEMBER 30, 2002 AND DECEMBER 31, 2001
ASSETS
September 30, December 31,
2002 2001
---- ----
Current
Bank $ 0 $ 310
Receivables 178,906 119,484
Prepaid expenses 13,079 19,801
Property held for resale 0 86,680
---------- ----------
Total Current Assets $ 191,985 $ 226,275
Capital assets 561,454 739,995
Other intangibles 11 11
---------- ----------
TOTAL ASSETS $ 753,450 $ 966,281
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Bank indebtedness ($ 3,647) $ 0
Bank operating loans 80,782 156,950
Payables and accruals 1,613,286 1,196,860
Income and other taxes payable 0 0
Deferred revenue 24,152 29,040
Current portion of long term debt 330,000 310,221
---------- ----------
Total current liabilities 2,044,573 1,693,071
Other Liabilities
Convertible debt 646,775 174,654
Long term debt 738,915 662,109
---------- ----------
Total Other Liabilities 1,385,690 836,763
---------- ----------
Minority Interest 157,650 156,950
Stockholders' deficit
Capital stock 1,261,428 1,255,827
Currency translation adjustment 133,883 125,494
Accumulated deficit (4,229,774) (3,101,824)
--------- ---------
Total stockholders' deficit (2,834,463) (1,720,503)
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT $ 753,450 $ 966,281
========== =========
F-9
UNAUDITED HISTORICAL CONSOLIDATED STATEMENT OF OPERATIONS
OF CONVERGIX, INC.
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
2002 2001
----------- -----------
Revenue $ 317,147 $ 149,761
Selling, general and
administrative expenses 1,110,927 1,139,406
Research and development expense 0 190,031
----------- -----------
(Loss) before interest expense ( 793,780) ( 1,179,676)
Interest expense
Long Term 62,128 25,862
Other 27,992 24,753
----------- -----------
(Loss) before discontinued operations
and income taxes ( 883,900) ( 1,230,291)
(Loss) on discontinued operations (Note 4) ( 244,050) ( 241,095)
Income tax expense (recovery 0 ( 320,949)
----------- -----------
Net loss $(1,127,950) $(1,792,335)
=========== ===========
F-10
UNAUDITED HISTORICAL STATEMENT OF CASH FLOWS
OF CONVERGIX, INC.
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
September 30, September 30,
2002 2001
---- ----
Net inflow (outflow) of cash and cash
equivalents related to the following
activities:
Operating
Net (loss) ($1,127,950) ($1,792,335)
Items not affecting cash
Amortization 121,072 85,651
Loss on disposal of asset 19,553 0
Prior period adjustment 0 ( 53,328)
Currency translation adjustment 9,746 40,320
Changes in non-cash working capital items
Accounts receivable ( 48,960) 199,996
Inventory 0 11,099
Property held for resale 87,066 0
Prepaid expenses 6,811 15,755
Accounts payable 411,088 396,064
Deferred revenue ( 5,017) 9,891
Income and other taxes 0 15,039
---------- ----------
( 526,591) ( 1,071,848)
Financing
Proceeds from long term debt 92,248 407,750
Proceeds from convertible loan 471,342 0
Proceeds from (repayment of) bank
indebtedness 3,647 ( 40,440)
Proceeds from (repayment of)
operating loan ( 76,869) ( 31,665)
---------- ----------
490,368 335,645
Investing
Proceeds from issuance of capital stock 0 1,266,829
Intangible assets 0 ( 11)
Payable to minority interest 0 ( 53,725)
Acquisition of capital assets 35,913 ( 479,789)
---------- ----------
35,913 733,304
Net inflow (outflow) of cash and cash
equivalents ( 310) ( 2,898)
Cash and cash equivalents, beginning
of period 310 0
---------- ----------
Cash and cash equivalents, end of period $ 0 ($ 2,898)
========== ==========
F-11
UNAUDITED HISTORICAL CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
OF CONVERGIX, INC.
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
Share Capital Total
Common Preferred Accumulated Stockholders'
Shares Amount Shares Amount Deficit Deficit
Balance, December 31, 1999 100 $ 67 $(205,285) ($205,218)
Issuance of preferred shares 250 $166,725 0 166,724
Net Loss 0 0 0 0 (746,482) (746,482)
Currency translation
adjustment 9,685
--------- ------- --------- ---------- ---------- --------
Balance, December 31, 2000 100 $ 67 $ 250 $166,725 $(951,767) $(775,290)
--------- ------- --------- ---------- ---------- --------
Issuance of common shares 1,060 227 $ 227
Issuance of preferred shares 117.1 1,255,600 1,255,600
Cancellation of original
shares (100) ( 67) ( 67)
Reclassification of
preferred shares to
minority interest ( 250) ( 166,725) (166,725)
Adjustment to opening
deficit balance (155,933) (155,933)
Net Loss (1,792,335) (1,792,335)
Currency translation
adjustment 108,495
--------- ------- --------- ---------- ---------- ----------
Balance, September 30, 2001 $ 1,060 227 117.1 $1,255,600 $(2,900,036) $(1,526,028)
Net Loss ( 201,288) ( 201,788)
Currency translation
adjustment 7,313
--------- ------- --------- ---------- ---------- ----------
Balance, September 30, 2002 $ 1,060 227 117.1 $1,255,600 $(3,101,824) $(1,720,503)
Net Loss (1,127,950) (1,127,950)
Currency translation
adjustment 13,991
--------- ------- --------- ---------- ---------- ----------
Balance, September 30, 2002 $ 1,060 227 117.1 $1,255,600 $(4,229,774) $(2,834,463)
========= ======= ========= ========== ========== ==========
F-12
UNAUDITED HISTORICAL CONSOLIDATED BALANCE SHEETS
OF CONVERGIX, INC.
AS OF DECEMBER 31, 2001 AND 2000
ASSETS
December 30, December 31,
2001 2000
---- ----
Current Assets
Cash $ 310 $ 0
Receivables 119,484 522,752
Inventories, at cost 0 11,688
Prepaid expenses 19,801 58,416
Property held for resale 86,680 92,078
---------- ----------
Total Current Assets $ 226,275 $ 684,934
Capital assets 739,995 291,079
Minority interests 0 106,129
Future income tax asset 0 329,122
Other intangibles 11 0
---------- ----------
TOTAL ASSETS $ 966,281 $1,411,264
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Bank indebtedness $ 0 $ 42,586
Bank operating loans 156,950 200,070
Payables and accruals 1,196,860 1,042,441
Income and other taxes payable 0 313,606
Deferred revenue 29,040 28,766
Current portion of long term debt 310,221 61,939
---------- ----------
Total current liabilities 1,693,071 1,689,408
Other Liabilities
Convertible debt 174,654 0
Long term debt 662,109 440,734
---------- ----------
Total Other Liabilities $ 836,763 $ 440,734
---------- ----------
Minority Interest 156,950 56,412
Stockholders' deficit
Capital stock 1,255,827 166,792
Currency translation adjustment 125,494 9,685
Accumulated deficit (3,101,824) (951,767)
--------- ---------
Total stockholders' deficit (1,720,503) (775,290)
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT $ 966,281 $1,411,264
========== =========
F-13
UNAUDITED HISTORICAL CONSOLIDATED STATEMENT OF OPERATIONS
OF CONVERGIX, INC.
FOR THE FISCAL YEARS ENDED DECEMBER 31, 2001 AND 2000
2001 2000
----------- -----------
Revenue $ 228,533 $ 13,381
Selling, general and
administrative expenses 1,478,458 339,191
Research and development expense 74,559 25,870
----------- -----------
(Loss) before interest expense (1,324,484) ( 351,680)
Interest expense
Long Term 44,022 0
Other 32,952 11,753
----------- -----------
(Loss) before discontinued operations
and income taxes (1,401,458) ( 363,433)
(Loss) on discontinued operations ( 298,833) ( 542,220)
Minority interest on loss 0 83,812
Income tax expense (recovery 293,832 ( 75,359)
----------- -----------
Net loss $(1,994,123) $( 746,482)
=========== ===========
F-14
UNAUDITED HISTORICAL CONSOLIDATED STATEMENT OF CASH FLOW
OF CONVERGIX, INC.
FOR THE FISCAL YEARS ENDED DECEMBER 31, 2001 AND 2000
December 30, December 31,
2001 2000
---- ----
Net inflow (outflow) of cash and cash
equivalents related to the following
activities:
Operating
Net (loss) ($1,994,123) ($ 746,482)
Items not affecting cash
Amortization 135,135 39,690
Minority interest on loss 0 ( 83,812)
Prior period adjustment ( 52,972) 0
Currency translation adjustment 53,867 8,045
Changes in non-cash working capital items
Accounts receivable 372,619 ( 379,121)
Inventory 11,003 ( 11,688)
Prepaid expenses 35,190 ( 55,228)
Accounts payable 215,536 879,156
Deferred revenue 1,960 28,766
Income and other taxes 14,606 ( 25,897)
---------- ----------
( 1,207,178) ( 346,570)
Financing
Proceeds from long term debt 499,129 298,139
Proceeds from convertible loan 174,654 0
Proceeds from (repayment of) bank
indebtedness ( 40,089) ( 122)
Proceeds from (repayment of)
operating loan ( 31,390) 150,053
---------- ----------
602,304 448,069
Investing
Proceeds from issuance of capital stock 1,255,764 166,725
Intangible assets ( 11) 0
Payable to minority interest ( 53,258) ( 4,122)
Acquisition of capital assets ( 597,312) ( 264,102)
---------- ----------
605,184 ( 101,499)
Net inflow (outflow) of cash and cash
equivalents 310 0
Cash and cash equivalents, beginning
of period 0 0
Cash and cash equivalents, end of period $ 310 $ 0
========== ==========
F-15
UNAUDITED HISTORICAL CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
OF CONVERGIX, INC.
FOR THE FISCAL YEARS ENDED DECEMBER 31, 2001 AND 2000
Share Capital Total
Common Preferred Accumulated Stockholders'
Shares Amount Shares Amount Deficit Deficit
Balance, December 31, 1999 100 $ 67 $(205,285) ($205,218)
Issuance of preferred shares 250 $166,725 0 166,724
Net Loss 0 0 0 0 (746,482) (746,482)
Currency translation
adjustment 9,685
--------- ------- --------- ---------- ---------- --------
Balance, December 31, 2000 100 $ 67 $ 250 $166,725 $(951,767) $(775,290)
--------- ------- --------- ---------- ---------- --------
Issuance of common shares 1,060 227 $ 227
Issuance of preferred shares 117.1 1,255,600 1,255,600
Cancellation of original
shares (100) ( 67) ( 67)
Reclassification of
preferred shares to
minority interest ( 250) ( 166,725) (166,725)
Adjustment to opening
deficit balance (155,933) (155,933)
Net Loss (1,994,123) (1,994,123)
Currency translation
adjustment 115,808
--------- ------- --------- ---------- ---------- ----------
Balance, December 31, 2001 $ 1,060 227 117.1 $1,255,600 $(3,101,824) $(1,720,503)
========= ======= ========= ========== ========== ==========
F-16
CONVERGIX, Inc.
NOTES TO UNAUDITED HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
1. BASIS OF PRESENTATION
CONVERGIX Inc. is incorporated under the New Brunswick
Business Corporations Act and is a holding company which
holds investments in two subsidiary companies whose business
activities include developing, marketing, installation and
support of a suite of aviation enterprise software and
providing of current and specialized knowledge and skills
associated with computer networks and application
integration of computer programs in network environments.
CONVERGIX Inc. was incorporated on January 18, 2001 in
connection with a corporate reorganization of the two
subsidiary companies, Cynaptec Information Systems Inc. and
Intelisys Aviation Systems Inc. Following the
reorganization, CONVERGIX Inc. owns 100% if the issued and
outstanding common shares of Cynaptec Information Systems
Inc. and 53.1% of the issued and outstanding common shares
of Intelisys Aviation Systems Inc.
Cynaptec Information Systems Inc. owns 46.9% of the issued
and outstanding common shares of Intelisys Aviation Systems
Inc.
The comparative figures are the consolidated financial
results of Cynaptec Information Systems Inc. for the 12
months ended December 31, 2000. At December 31, 2000,
Cynaptec Information Systems Inc. owned 51% of the issued
and outstanding common shares of Intelisys Aviation Systems
Inc.
The reorganization on January 18, 2001 did not result in a
change of control of Cynaptec Information Systems Inc. and
Intelisys Aviation Systems Inc.
The accompanying financial statements have been prepared on
a going-concern basis, which contemplates the realization of
assets and the satisfaction of liabilities in the normal
course of business. As shown in the financial statements,
the company has incurred net losses and negative cash flows
from operations. Also as at December 31, 2000 and December
31, 2001, the company had a net shareholders' deficiency in
assets. These factors, among others, indicated that the
Company might be unable to continue as a going concern. The
financial statements do not include any adjustments relating
to the recoverability and classification of recorded asset
amounts, or the amount of and classification of liabilities
that might be necessary should the Company be unable to
continue as a going concern. The Company's continuation as
a going concern is dependant upon its ability to ultimately
obtain profitable operations, generate sufficient cash flow
to meet its obligations, and obtain additional financing as
may be required.
CONVERGIX, Inc.
NOTES TO UNAUDITED HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
1. BASIS OF PRESENTATION (continued)
The Company has undergone an informal financial
restructuring and has reached agreements with the majority
of unsecured trade creditors.
Management's Plans
As shown in the consolidated financial statements, the
Company has a negative working capital position, and a net
shareholders' deficiency in assets. Since its inception,
the Company has devoted substantially all of its efforts to
developing its products, obtaining financing, assessing
market demand, and obtaining customers. The success of the
Company's operations and, ultimately, the attainment of
profitable operations are dependant on achieving a level of
sales adequate to support the Company's cost structure.
Financial Statements
These unaudited financial statements reflect all
adjustments, consisting of only normal and recurring items,
which are, in the opinion of management, necessary to
present a fair statement of the results.
2. ACCOUNTING POLICIES
The financial statements have been prepared in accordance
with accounting principles generally accepted in the United
States of America and include the following significant
accounting policies:
a) Principles of Consolidation
The consolidated financial statements include the
accounts of the Company and its wholly owned
subsidiaries, Cynaptec Information Systems Inc. and
InteliSys Aviation Systems Inc.
b) Property held for resale
Property vacated in the previous year (previously
classified as property, plant and equipment) and held
for resale is carried at net book value, which is
estimated to be less than market.
CONVERGIX, Inc.
NOTES TO UNAUDITED HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
2. ACCOUNTING POLICIES (continued)
c) Capital Assets
Capital assets are recorded at cost. Depreciation is
provided using the declining balance method at the
following annual rates:
Office furniture and equipment 20%
Computer equipment and software 30%
Library 50%
Leasehold improvements 7%
d) Research and Development
Research and Development costs relating to the
development of aviation enterprise software are charged
to expense as incurred net of any investment tax
credits, grants and recoveries.
e) Income Taxes
Income taxes are provided for current taxes payable or
refundable, and temporary differences arising from the
future tax consequences of events that have been
recognized in the Company's financial statements or
income tax returns. The effect of income taxes
measured based on currently enacted tax laws and rate.
A valuation allowance is provided for deferred tax
assets when it is more likely than not that some or all
of such assets will not be realized.
f) Cash and Cash Equivalents
The company considers cash on hand and balances with
banks, net of overdrafts, and investments in highly
liquid investment instruments with maturities of 90
days or less at the date of purchase to be cash
equivalents.
CONVERGIX, Inc.
NOTES TO UNAUDITED HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
2. ACCOUNTING POLICIES (continued)
g) Use of Estimates
The preparation of financial statements in conformity
with accounting principles generally accepted in the
United States of America require management to make
estimates and assumptions that affect the reported
amounts of assets, liabilities, revenues and expenses,
and disclosure of contingent liabilities in these
financial statements. Actual results could differ from
those estimates.
h) Revenue Recognition
CONVERGIX Inc. recognizes revenue from the sale of
software licenses, training, and support after an order
has been received. The company will then recognize
additional monthly revenue based on customer usage of
the Company's products and systems.
i) Foreign Currency Translation
The Company's functional currency is the Canadian
dollar since it is the currency of the primary economic
environment in which the company operates. Assets and
liabilities are translated into United States dollars
using the current rate of exchange. Revenues,
expenses, gains and losses are translated into United
States dollars using the weighted-average exchange
rate.
3. ACCOUNTS RECEIVABLE
2001 2000
---- ----
Accounts receivable - Trade $ 5,809b $ 428,837
Income tax receivable 24,272 0
Credit advances due from Compaq 80,189 0
Long-term debt advances due from ACOA 9,214 0
Shareholder 0 19,397
Other 0 74,518
-------- ---------
$119,484 $522,752
CONVERGIX, Inc.
NOTES TO UNAUDITED HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
4. DISCONTINUED OPERATIONS
Effective March 31, 2001, the company ceased selling
supporting hardware and other supplies from its subsidiary,
Cynaptec Information Systems Inc. in order to concentrate on
the development and marketing of the "Amelia" software
package.
The results of discontinued operations are as follows:
Revenue $ 306,654 $737,818
Direct Costs 444,422 679,478
Administrative 161,065 600,560
------- -------
605,487 1,280,038
------- --------
Loss on discontinued operations $ 298,833 $ 542,220
5. PRIOR PERIOD ADJUSTMENT
During 2000, one of the subsidiary companies failed to
account for interest expense in the amount of $ 43,282 and a
rental expense of $ 9,690. As a result, the opening deficit
has been increased by $52,972.
6. CAPITAL ASSETS 2001 2000
Accumulated Net Net
Cost Depreciation Book Value Book Value
Computer equipment $ 559,737 $ 130,703 $ 429,034 $ 65,397
and software
Leasehold improvements 158,761 13,179 145,582 115,684
Office furniture and
Equipment 120,965 39,664 81,301 107,956
Trade show booth 97,785 14,668 83,117 0
Library 6,694 5,733 961 2,041
--------- -------- ---------- ---------
$ 943,942 $ 203,947 $ 739,995 $ 291,078
CONVERGIX, Inc.
NOTES TO UNAUDITED HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
7. BANK INDEBTEDNESS
The bank indebtedness and bank operating loans are secured
by a general security agreement and a postponement and
assignment of claim. The bank indebtedness and bank
operating loans bear interest at prime plus 2.5% to 3.5%.
8. LONG-TERM DEBT 2001 2000
Atlantic Canada Opportunities Agency (ACOA)
Unsecured repayable contribution,
non-interest bearing Repayable in monthly
installments of $1,256. $ 57,758 $ 69,358
Atlantic Canada Opportunities Agency (ACOA)
Unsecured repayable contribution, non-interest
bearing Repayment is calculated as 3% of the
gross annual sales where first payment shall
be due April 2001 and subsequent repayments are
due annually for a period of ten years or until
it has been repaid. 204,968 217,734
Bank loan, bearing interest at prime plus
2.5%, repayable in monthly installments of
$785, plus interest, maturing November 2001 3,767 9,003
Shareholder loan, unsecured, bearing interest
at prime plus 2%, repayable in monthly
installments of $457 including interest,
maturing May 2005. 12,466 21,719
Mortgage payable, secured by land, building and a
Shareholder guarantee for $31,390, bearing
interest at the banks base rate plus 0.750%,
repayable in 36 monthly principal installments
of $942 commencing June 2000, followed by
96 monthly principal installments of $628,
commencing June 2003, maturing May 2011 82,870 93,033
Bank loan, secured by equipment and a
shareholder guarantee of $ 12,556, bearing
interest at prime plus 1.25%, repayable in
monthly installments of $1601 plus
interest, maturing March 2005 76,837 91,826
Promissory note, unsecured,
bearing interest at 6% per
Month, due on demand 62,780 0
CONVERGIX, Inc.
NOTES TO UNAUDITED HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
8. LONG-TERM DEBT (continued)
ACOA, Amelia marketing loan, unsecured repayable
Contribution, non-interest bearing, repayment is
Repayable in 59 monthly, installments of $5,233
Followed by 1 final installment of $5,170 where the
First repayment shall be due January 2002 177,397 0
Promissory notes, unsecured, bearing interest at
Varying rates between 6.7% - 12% repayable
Between August 31, 2001 and December 31, 2001 171,844 0
BDC Leasehold loan, secured by shareholder
Guarantee and general security agreement covering
Equipment, bearing interest at 10.8%, repayable in
1 installment of $1,099 due June 2001, followed by
61 consecutive monthly installments of $2,040
commencing in July 2001 with final payment in
July 2006 72,197 0
Shareholder loan, non-interest bearing,
no set terms of repayment 49,446 0
------ --------
972,330 502,673
Current portion of long-term debt 310,221 61,939
------- --------
$662,109 $ 440,734
======= =======
The aggregate maturities of long-term debt for each of the five
years subsequent to December 31, 2001 are approximately as
follows:
2002 $ 310,221
2003 136,233
2004 131,838
2005 129,327
2006 129,327
CONVERGIX, Inc.
NOTES TO UNAUDITED HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
8. LONG-TERM DEBT (continued)
At December 31, 2001 the Company is in default on principal and
interest payments for many of its obligations, as follows:
Principal payments in default $ 194,995
Interest payments in default 53,500
--------
$ 248,495
The company is in the process of refinancing both its long-term
and short-term debt obligations.
9. MINORITY INTEREST
At December 31, 2001, minority interest consists of
preferred shares of Cynaptec Information Systems Inc.
At December 31, 2000, minority interest consists of a share
in the net loss of InteliSys Aviation Systems Inc. The
minority interest at December 31, 2000 was eliminated
following the corporate reorganization on January 18,2001.
10. CAPITAL STOCK 2001 2000
Authorized:
The company is authorized to issue:
1) An unlimited number of preferred shares without par
value issuable in series with the following series
authorized and the number of shares of such series fixed as
follows:
1) 200 Series 1 preferred shares without par value to be
designated as "Series 1 Preferred Shares"
2) An unlimited number of Class A common shares without
par value, and
3) An unlimited number of non-voting Class B common shares
without par value.
CONVERGIX, Inc.
NOTES TO UNAUDITED HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
10. CAPITAL STOCK (continued) 2001 2000
Issued and outstanding
1,060 common shares $ 227 $ 67
117.1 preferred shares 1,255,600 166,725
--------- ---------
$ 1,255,827 $166,792
========= =========
During the year, the Company issued 1,060 common shares in
connection with a corporate reorganization of its subsidiary
companies, Cynaptec Information Systems Inc. and Intelisys
Aviation Systems Inc.
In addition, the Company issued 117.1 preferred shares for
cash consideration of $ 627,800 and a $ 627,800 credit note,
which is being used to purchase capital assets.
11. COMMITMENTS
The Company has an $ 80,189 credit note from Compaq, which
intends to use to purchase capital assets in the next twelve
months.
The Company is committed to minimum annual lease payments
under various operating leases for office, vehicles and
certain office equipment. The minimum payments required
under these leases for each of the five years subsequent to
December 31, 2001 are approximately as follows:
2002 $ 143,138
2003 109,237
2004 95,426
2005 95,426
2006 95,426
12. INCOME TAXES 2001 2000
Future income tax expense
Net reduction of future tax asset $ 329,122 $ 0
Future income tax recovery 0 (75,359)
Current income tax recovery (24,272)
------- -------
$ 304,850 (75,359)
CONVERGIX, Inc.
NOTES TO UNAUDITED HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
12. INCOME TAXES (continued)
At December 31, 2001, management provided a valuation
allowance for its future income tax asset on the basis that
realization is not "more likely than not" in light of the
Company's operating losses over the past two years.
The Company has not recorded in its financial statements the
income tax benefits of prior years' losses of $ 3,136,604
relative to its wholly owned subsidiary, InteliSys Aviation
Systems Inc. These losses are available to reduce taxable
income in future years and if not utilized, will expire as
follows:
2006 $ 55,469
2007 1,767,946
2008 1,313,189
13. CONVERTIBLE LOAN
The convertible loan consists of $ 174,654 payable to Dawson
Bay Solutions for consulting fees.